Energy 147 (2018) 142e154

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Energy
journal homepage: www.elsevier.com/locate/energy

The Philippines energy future and low-carbon development strategies

Md Alam Hossain Mondal*, Mark Rosegrant, Claudia Ringler, Angga Pradesha,
Rowena Valmonte-Santos
International Food Policy Research Institute (IFPRI), 2033 K Street, NW Washington DC, USA

a r t i c l e i n f o a b s t r a c t

Article history: This paper presents an assessment of alternative, long-term energy supply and low-carbon strategies for
Available online 4 February 2018 the Philippine power sector from 2014 to 2040 using TIMES model. It examines the potential contri-
bution of renewable energy to diversify the Philippine energy supply-mix to meet future electricity
Keywords: demands. The reference scenario compares the impact of four alternative policy goals: (1) carbon tax, (2)
Energy future targeted renewable-based power generation, (3) limited coal share in supply-mix, and (4) renewables
Optimization
subsidy. The reference scenario shows a significant increase of the share of coal-based power generation
Climate change
and import dependency of fossil-fuel increases from 227 PJ in 2016 to 1073 PJ in 2040. The model results
Energy security
for the alternative policy scenarios show a large potential for renewable energy-based power generation.
The alternative policy options show a significant decrease of import dependency in the energy supply-
mix for power generation. Most alternative policy scenarios project a higher total system cost, with
the exception of the subsidy scenario. System cost increases only 2.6% in the renewables target scenario
relative to the reference scenario. However, long-term benefits from investing in the alternative policy
options would need to be considered, including diversification of energy supply-mix, improved energy
security, and progress toward a low-carbon society.
© 2018 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY license
(http://creativecommons.org/licenses/by/4.0/).

1. Introduction consumption were 36.01 million tons of oil-equivalent (mtoe) and

Energy consumption drives economic growth and is a key input
for socio-economic development [1]. Access to clean energy is
considered vital for modern living and a necessary element for all
production sectors to function well [2]. The Philippines' energy
sector faces the dual challenges of (1) heavy reliance on fossil fuels
and imported energy and (2) high energy demand. The average
annual growth of Philippine gross domestic product (GDP, a nota-
tion list is given in Table 1) in the past ten years has been 5.4% [3]
and the country plans to increase its GDP growth to 7% by 2040 [4].
The planned, higher GDP growth will drive higher energy demand
growth.
The country's primary energy supply consists of 60% fossil fuels
and 40% renewable energy. The share of oil in the total energy
supply-mix is significant, at about 31% in 2014 [5,6]. The country's
self-sufficiency in primary energy supply has decreased in recent
years. The renewable energy share declined from 43% in 2012 to
40% in 2014 [6]. Total primary energy supply and final energy
* Corresponding author.
E-mail address: a.mondal@cgiar.org (M.A.H. Mondal).
22.36 mtoe in 2006, and increased to 47.5 mtoe and 28.57 mtoe in
2014, respectively [5]. Total imported energy was 14.26 mtoe in
2006 and increased to 20.86 mtoe in 2014; this represents a share
of 44% in the primary energy supply-mix. About 75% of fossil-fuel
demand is met through imports [7]. Coal imports increased about
two-fold between 2006 and 2014 [5]. Fuel consumption by the
Philippine power sector accounts for about 46% of total primary
energy. The country's demand-supply outlook between 2015 and
2030 shows an additional 7 gigawatt (GW) capacity required to
meet the expected electricity demand by 2030 [6].
The Philippine power sector currently relies largely on fossil-
fuels (about 77%) and is expected to increase use of coal-based
plants to meet future energy demand, which would negatively
affect environmental outcomes. Coal consumption in the power
sector increased from 7 million tons (mt) in 2006 to 15.5 mt in 2014.
Due to heavy reliance on coal-based power generation, greenhouse
gas (GHG) emissions are expected to grow rapidly. CO2 emissions
from coal power plants amounted to 26 mt and are projected to
increase to 92 mt of carbon dioxide per year if all planned coal
plants are installed [8].
The country has been suffering electricity outages or shortages,
particularly during the summer months, since the 1990s. Electricity

https://doi.org/10.1016/j.energy.2018.01.039
0360-5442/© 2018 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
 M.A.H. Mondal et al. / Energy 147 (2018) 142e154
Table 1
Notation list.
CC: Combined Cycle
CDM: Clean Development Mechanism
CO2: Carbon dioxide
CSP: Concentrated Solar Power
DOE: Department of Energy
EFOM: Energy Flow Optimization Model
ETSAP: Energy Technology Systems Analysis Program
FiT: Feed-in Tariff
GDP: Gross Domestic Product
GHG: greenhouse gas
GW: gigawatt
GWh: gigawatt hours
IGCC: Integrated Gasification Combined Cycle
IMF: International Monetary Fund
INDCs: Intended Nationally Determined Contributions
IPCC: The Intergovernmental Panel on Climate Change
demand was about 25.6 GWh (GWh) in 1991 and increased to about
53 GWh in 2003 and 77.3 GWh in 2014 [5]. Primary energy supply is
expected to double between 2011 and 2030. Energy scarcity has
detrimental impacts on economic growth. Current challenges in the
electricity sector in the Philippines include a supply-demand gap
characterized by unmet demand; high electricity prices; under-
investment in generation; reduced self-sufficiency; and expected
high growth of GHG emissions levels. A national renewable energy
program was adopted to dramatically increase (three-fold) the
generation capacity of renewable energy technologies for power
generation by 2030 [9]; this help to substantially mitigate GHG
emissions from the power sector.
To help reduce global climate change, the government of the
Philippines has made a commitment to limit the future growth of
GHG emissions by implementing alternative policy options, such as
carbon taxes, improvement of energy efficiency in both generation
and consumption, diversification of the energy supply-mix, and
accelerated development of renewable energy [10]. The country
intends to reduce emissions by about 70% from different sectors,
such as energy, transport, waste, forestry, and industry, by 2030,
compared to the business-as-usual scenario of emission levels be-
tween 2000 and 2030 [11].
Potential ways to address these challenges include diversifica-
tion of the energy supply-mix and inclusion of climate-change
mitigation strategies in energy development and infrastructure
support. These efforts should support national economic develop-
ment through employment generation, increased food security,
and reduced poverty.
The renewable energy potential of the Philippines is relatively
high and could contribute to the supply of modern reliable energy
services and improved overall energy security. The government's
energy reform agenda highlights the importance of access to a
more reliable energy supply, using indigenous energy resources
while minimizing imported fossil fuels in an optimal and cost-
effective way. The government's energy reform agenda focuses on
(1) ensuring energy security, (2) achieving optimal energy pricing,
(3) diversifying sources of fuel, and (4) developing a sustainable
energy system.
The feasibility of this type of diversification of the energy
supply-mix, integration of renewable energy into the energy sys-
tem, and policy implications for long-term sustainable energy
policy development can be assessed by applying bottom-up energy
optimization models. This can provide important insights into the
implications of prospective technologies that can be pursued by the
Philippine government to improve energy security and develop a
low-carbon society in a cost-efficient and effective way. Energy
143
MARKAL: MARKet Allocation
MESSAGE: Model for Energy Supply Strategy Alternatives and their General
Environmental Impact
mt: million tons
mtoe: million tons of oil-equivalent
NOx: Nitrogen oxides
NREP: National Renewable Energy Program
PJ: Peta joule
POLES: Prospective Outlook for Long-Term Energy. Scenarios
PSC: Pulverized Sub-Critical
PV: Photovoltaics
RES: Reference Energy System
SO2: Sulfur dioxide
ST: Steam Turbine
T&D: Transmission and Distribution
TIMES: Integrated MARKAL-EFOM System
WASP: Wien Automatic System Planning Package
planning using a comprehensive modeling tool helps national
governments anticipate and respond to the rapid changes occurring
in the energy sector, including changes in technology learning
curves in lowering costs for clean energy technologies and intro-
duction of innovative technologies. However, comprehensive en-
ergy assessment, designed to support long-term energy policy
development, is currently lacking in the Philippines.
Relevant energy supply modeling tools for national and regional
scale analysis include: MARKAL/TIMES, MESSAGE, POLES, and
WASP [12]. The TIMES model (a successor of the MARKAL model)
used in this study is the most widely used energy systems opti-
mization model. The MARKAL/TIMES model has been used for
many national [13e18], regional [19e22], and global studies
[23e25].
This study develops a TIMES (The Integrated MARKAL-EFOM
System) modeling framework for the Philippines to identify least-
cost solutions for alternative technology selection and policy op-
tions to meet the projected electricity demand over 26 years
(20142040). The main objective of this study is to identify alter-
native energy development pathways applying the TIMES optimi-
zation framework that meet the Philippines' rising electricity
demand while improving energy security, promoting access to
reliable modern energy, and mitigating GHG emissions. Sensitivity
analysis is performed considering variation of key parameters such
as discount rates, coal price, investment cost of renewable energy
technologies and impacts on natural gas supply curve.
The intention of this study is not to predict future developments
of the energy sector, but rather to provide insights into the impli-
cations of different technology and energy options that can be
pursued by the government of the Philippines in a sustainable way
over the long term.
2. TIMES model
TIMES combines advanced versions of the MARKAL
(market allocation) model. The MARKAL model is a linear pro-
gramming model developed shortly after the oil crisis in 1976 by a
consortium of members of the International Energy Agency's En-
ergy Technology Systems Analysis Program (ETSAP) to serve as an
energy-system planning and optimization tool in order to under-
stand whether: (1) alternatives to oil were technically feasible and
economically and environmentally sustainable, (2) solutions were
global or dependent on national circumstances, and (3) global en-
ergy research and development paths were possible or advanta-
geous. TIMES is the successor of MARKAL and the executive
committee of ETSAP began promoting the TIMES model for new
144 M.A.H. Mondal et al. / Energy 147 (2018) 142e154

users starting in 2008.
The TIMES model is a linear programming bottom-up energy
model. The model computes an economic equilibrium for energy
markets, from the supply to end-use energy services. TIMES com-
putes both the energy flow and energy prices in such a way that the
suppliers of energy produce exactly the amount of energy needed
to meet demand. It is a demand-driven model.
The main building blocks of the model are the processes (types
of power plants or technologies) and commodities (energy carrier,
cost, emissions, etc.), which are connected by commodity flows in a
network called reference energy system (RES). This approach fa-
cilitates graphical analysis of the whole energy systemdfrom pri-
mary energy resources at the start to sector-wide energy services at
the enddusing different conversion processes.
The TIMES model determines the energy and technology mix
needed to meet the energy demand of an energy system, given
specific limitations regarding available technologies and energy
sources. It then determines an optimal energy supply mix (in
economic terms) based on technological and economic parameters,
such as the minimum cost for the technologies selected. (The
schematic structure of the TIMES model is presented in Fig. 1.) Key
exogenous input parameters are: techno-economic database, en-
The model consists of a set of constraints and one objective
function, which is usually chosen to minimize the long-term dis-
counted system cost of the energy system. The constraints (equa-
tions or inequalities) and objective function (criterion to be
minimized or maximized) are expressed by decision variables and
parameters, where decision variables are unknown or endogenous
quantities, which TIMES determines, and parameters are known or
exogenous quantities that are specified by the modeler. The
configuration of the supplied RES is dynamically adjusted by TIMES
in such a way that all model equations are satisfied and long-term
system cost is minimized. The objective function is the sum of all
region objectives, all discounted to the same modeler-selected base
year, as shown in equation.
X
OBJðzÞ ¼ ½REG OBJðz; rÞ (1)
r2REG
where OBJðzÞ: The total system cost, discounted to the beginning of
the year z, r: region.
Each regional (REG) objective OBJðzÞ is decomposed into the
sum of nine components that can be presented as equation.

2 3
X INVCOSTðyÞ þ INVTAXSUBðyÞ þ INVDECOMðyÞ
REG OBJðz; rÞ ¼ DISCðy; zÞ  4 þFIXCOSTðyÞ þ FIXTAXSUBðyÞ þ VARCOSTðyÞþ 5 (2)
r2ð∞;þ∞Þ ELASTCOSTðyÞ  LATEREVENUESðyÞ  SALVAGEðzÞ

ergy demand, energy prices, emission coefficients, targets, sub-
sidies, and taxes. Key endogenous outputs are: technology
investments, annual activities of technologies, energy requirement,
marginal energy prices, levelized cost of electricity, import/export
of energy, emission trajectories, emissions permits, and total dis-
counted system costs.
where DISCðy; zÞ :value, discounted to the beginning of year z using
general discount factor, the regional index r is omitted from the
nine components for simplicity of notation. The 1st and 2nd terms
are linked to investment costs, 3rd one is related to decom-
missioning capital costs, the 4th and 5th terms are linked to fixed
annual costs, 6th term is to all variable costs, 7th one is demand loss

Fig. 1. Schematic structure of the TIMES model.

 M.A.H. Mondal et al. / Energy 147 (2018) 142e154 145

costs, the 8th term is actually a revenue that accounts for com-
modity recycling occurring after the end of horizon (EOH), and the
9th term is the salvage value of all capital costs of technologies
whose life extends beyond EOH.
Table 2 shows short-listed elements (basic equations) of the
TIMES model. Details of the TIMES objective function, equations,
variables, and parameters are discussed in the Energy Technology
Systems Analysis Program's documentation for the TIMES model
[26].
scenario is adopted in this TIMES modeling, because it best reflects
the pattern of recent economic growth. Table 3 presents projected
regional and sector-wise electricity demands. About 75% of elec-
tricity demand is in the Luzon region, where the commercial sector
dominates overall consumption. Total electricity consumption was
63.4 TWh (TWh) in 2014, and is projected to grow to 194.4 TWh in
2040.
3.3. Primary energy resources

3. Development of the Philippines TIMES framework
3.1. Philippines reference energy system
The reference energy system (RES) is the structural background
of the TIMES model and provides an illustrative impression of the
nature of an energy system. The development of a RES for the
Philippines is a key contribution of this study. The RES includes all
energy activities, from the source to the final end-use energy de-
mand. The RES can be extended to show emissions from energy
activities when primary energy is transported or converted from
one form to another. The TIMES model consists of a large set of
energy technologies, linked together by energy flows that mutually
form the RES. Fig. 2 presents the Philippines RES for the power
sector. All feasible energy resources such as coal, oil, gas, wind,
solar, biomass, hydro, and geothermal are incorporated in the RES,
including respective conversion technologies, transmission, and
distribution as well as sector-wise electricity demand. The TIMES
model finds the routes, energy-mix, and technologies presented in
RES that are best fit to meet the electricity demand in terms of
minimizing the system cost and optimizing energy resource use to
meet the overall objectives of the energy system. Techno-economic
parameters of each technology are included in this system to
identify the least-cost solution. The various constraints listed in
Table 2 are incorporated into this framework.
3.2. Exogenous electricity demand
The TIMES model needs projected energy service demands over
the time horizon of analysis. It is possible to project energy demand
in TIMES using macroeconomic forecasts as a demand driver. The
Philippines' future electricity demand was recently evaluated by a
comprehensive study applying detailed microeconomic factors
[28,29]. The study projected electricity demand for two alternative
GDP growth scenarios: (1) strong growth and (2) weak growth for
the Philippines up to 2040. The study shows that electricity de-
mand is expected to grow at an annual rate of 4.3% in the strong
growth scenario. Year-wise, projected demand growth is high in
2015 at 6% and declines to 4.5% in 2020, 4.3% in 2030, and 4.2% by
2040 in the strong growth scenario. The identified year-wise
electricity demand growth based on the strong economic growth
Primary energy resource costs need to be determined along
with their availability and supply limits for the modeling. Energy
supply prices and availability limits for electricity generation in the
Philippines are presented in Table 4. Fossil-fuel supply data for 2014
and 2015 are taken from the Philippines' energy balance sheets
supplied by the Department of Energy (DOE). The upper bounds of
coal and gas production for power generation in the Philippines is
expected to be 272 PJ and 301 PJ, respectively, by 2040. Due to the
lack of energy prices for power generation in the Philippines, the
authors used the energy prices reported by the International
Monetary Fund (IMF) for the years 2014, 2015, and 2016 [30]. All
costs are in 2014 US dollars (US$1 ¼ 46 Philippine pesos). The im-
ported coal price decreased from US$2.59/gigajoule (GJ) in 2014 to
US$1.96/GJ in 2016. Gas prices declined from US$3.26/GJ in 2014 to
US$1.83/GJ in 2016. Imported crude oil prices declined from
US$15.78/GJ in 2014 to US$6.93/GJ in 2016 [30]. An annual increase
rate of 2.00%, 3.25%, and 4.00% for coal, gas, and crude oil, respec-
tively, is considered from 2016 to the end of the analysis period
[37e39]. Renewable power generation capacity growth in the
Philippines is very largedsolar, wind, and biomass-based power
plant capacity increased from 26 MW in 2005 to 434 MW in 2014
[5]. Conventional renewable technologies, such as large hydro and
geothermal power generation capacity, increased slightly from
5200 MW in 2005 to 5461 MW in 2014. Considering recent
renewable energy technology development in the Philippines and
the global growth standard, a maximum annual growth of 30% is
applied for solar photovoltaics (PV) and wind-power plants [31]. An
annual growth of 10% is also applied for hydro and geothermal
power plants for new investment.
3.4. Conversion technologies
The characteristics of all conversion technologies need to be
developed in the reference energy system. These technologies
convert energy from primary resources to electricity to meet the
specified end-use electricity demand. The Philippines TIMES model
incorporates a fairly representative set of conversion technologies,
including all existing and planned technologies as well as a total of
12 different conversion technology types: pulverized coal subcrit-
ical, integrated gasification combined cycle (IGCC), oil-based steam
turbine (ST), diesel-based simple cycle, gas-based combined cycle

Table 2
TIMES basic short-listed equations [27].

Capacity transfer The total available capacity is equal to the sum of investments at past and current periods plus capacity in place prior to the horizon
Activity definition Equates an overall activity variable with the appropriate set of flow variables, properly weighted
Use of capacity The activity of the technology may not exceed its available capacity, as specified by the user defined availability factor
Commodity balance The disposition (consumption and export) of each commodity balances its procurement (production and imports)
Efficiency definition The ratio of the sum of some of its output flows to the sum of some of its input flows is equal to a constant efficiency
Flow share Limit the flexibility by constraining the share of each flow within its own group
Peak There must be enough installed capacity to exceed the required capacity in the season with largest demand for commodity
by a safety factor (peak reserve)
User constraints Impose annual or cumulative bounds on commodities (emissions or fossil fuel reserves limit) limit the share of processes
in the total production of commodity, limit investment in a process, dictate a percentage of a fuel for electricity generation
such as renewable sources
146 M.A.H. Mondal et al. / Energy 147 (2018) 142e154

Primary energy Conversion technologies Final energy End-use demand

Coal Circulating Fluidized Bed

Coal mining
Pulverized coal sub-supercritical

Integrated gasification combined 0.45

Coal import
cycle (IGCC)

Open cycle gas turbine

0.29

Gas mining Natural gas steam turbine

Residential
Combined cycle gas turbine 0.47
(21 TWh)

Diesel import
Commercial
Diesel internal combustion engine (18.8 TWh)
Electricity
Fuel oil import Fuel oil fired steam turbine 0.31 T&D loss: 9.1%
Own-use: 8.9% Industrial
Large hydropower dam (21.4 TWh)
Hydro
Hydro run of river
Other
(2.2 TWh)
Biomass 0.25
Biomass based power plant

Geothermal Geothermal power

Wind Wind power plant

Solar Photovoltaic (PV)

Solar
Concentrated solar power (CSP)

Fig. 2. Simplified reference energy system for the Philippines power sector. Notes: Values shown indicate conversion and transmission efficiency as well as demand in 2014.

Table 3 Table 4
Electricity demand (TWh) by sector and by region. Primary energy resource limits and cost [5,30,32,37e39].

Region Sector 2014 2016 2020 2025 2030 2035 2040 2014 2016 2020 2025 2030 2040

Luzon Residential 15.3 16.9 20.3 25.1 30.9 38.1 47.0 Mined natural gas:
Commercial 16.1 17.8 21.3 26.4 32.6 40.1 49.4 Cost (US$/GJ) 3.26 1.83 2.08 2.44 2.86 3.94
Industry 15.0 16.5 19.8 24.5 30.2 37.2 45.8 Upper bound (PJ) 126 136 163 198 232 301
Others 0.9 1.0 1.2 1.5 1.8 2.2 2.7 Mined Coal:
Total 47.3 52.3 62.5 77.4 95.5 117.7 144.9 Upper bound (PJ) 153 165 183 205 228 272
Visayas Residential 2.8 3.1 3.7 4.5 5.6 6.9 8.5 Cost (US$/GJ) 1.94 1.47 1.59 1.76 1.94 2.31
Commercial 1.3 1.4 1.7 2.1 2.6 3.2 4.0 Imported Coal:
Industry 3.2 3.6 4.3 5.3 6.5 8.0 9.9 Cost (US$/GJ) 2.59 1.96 2.12 2.34 2.59 3.08
Others 0.8 0.8 1.0 1.2 1.5 1.9 2.3 Imported oil costa:
Total 8.0 8.9 10.6 13.2 16.3 20.0 24.7 (US$/GJ) 15.78 6.93 8.11 9.86 12.00 17.76
Mindanao Residential 2.9 3.2 3.8 4.7 5.9 7.2 8.9 Biomass, solar and wind Resource bound for biomass: 100 PJ. New wind
Commercial 1.4 1.5 1.8 2.2 2.7 3.4 4.2 bound: 3.3 GW and no limit imposed for solar
Industry 3.3 3.6 4.3 5.4 6.6 8.2 10.0 Hydro and geothermal An upper bound of new hydro and geothermal
Others 0.5 0.6 0.7 0.9 1.1 1.3 1.7 capacity of 10 GW
Total 8.1 8.9 10.7 13.2 16.3 20.1 24.7
Notes.
Subtotal 63.4 70.1 83.8 103.8 128.1 157.8 194.4 a
Taxes and subsidies in the power sector are a debated issue in the Philippines
[33]. Diesel and fuel oil process are heavily subsidized to retain a certain percentage
of power generation share. Diesel and fuel oil prices are considered 73% and 74%
(CC), gas-based ST, hydropower, biomass-based plant, solar less, respectively, than imported oil price.

photovoltaic (PV), concentrated solar power (CSP), wind, and

geothermal. Planned power plants that are expected to be installed
 M.A.H. Mondal et al. / Energy 147 (2018) 142e154 147

by region in the next five years are incorporated into the model.
Existing conversion technologies and their capacities, including
government planned installation capacity by technology for the
next 5 years, are presented in Table 5. These technologies and ca-
pacities are included in the modeling.
Techno-economic parameters for fossil-fuel based power plants
are reviewed and incorporated in the modeling, mainly from
Refs. [34e38]. Renewable technologies are also reviewed and
incorporated in the modeling from Refs. [35,38e43]. No upper
bounds are specified for solar PV and CSP. The installed power
generation capacities of solar PV, wind power and CSP are
permitted to grow up a rate of up to 30% every year after their
introduction if they are selected by the TIMES model [12,18].
Table 6 presents techno-economic characteristics of selected
key conversion technologies. The total transmission and distribu-
tion (T&D) losses were 9.1% in 2014 in the Philippines [44] and this
loss is incorporated in this modeling. In addition to the T&D losses,
utility own-use of electricity was about 8.9% of total electricity
generation in 2014. For each technology type, values are given for
efficiency, capital cost, operations and maintenance (O&M) costs,
utilization factor, peak demand contribution factor, and plant life-
time. A T&D charge of US$0.0025/kWh is assumed.
3.5. Other model characteristics
The analysis covers a 26-year period from 2014 to 2040. The year
2014 is used as a base year due to the availability of data and annual
reports by the energy utilities in the Philippines. A discount rate of
6% is applied in this modeling. Due to lack of information on
emissions factors, the Intergovernmental Panel on Climate Change
(IPCC) guidelines for national greenhouse gas inventories emissions
factors for coal, oil, and gas are considered in this modeling
[46e48]. Emissions factors such as carbon dioxide (CO2), sulfur
dioxide (SO2), and nitrogen oxides (NOx) from fossil fuels are
incorporated.
Only centralized-grid electricity was considered. TIMES de-
termines how much electricity must be generated to feed to the
national grid in order to meet the domestic demand to support
strong economic growth. End-use demand technologies were
merged into the electricity demand allocated to their sector.
A regional approach is applied in the Philippines TIMES model.
The regions modeled include Luzon, Mindanao, and Visayas.
Existing technologies and planned technologies that are expected
to be installed by 2020 are included in the model. New technologies
can be selected by any region based on model choice to meet least-
cost, optimal solutions, and regional electricity demand. The energy
balance sheet for 2014 is disaggregated based on power generation-
mix by region. Bilateral electricity trade across the regions are
allowed applying a trade (transmission investment) cost of
US$0.03/kWh. Fossil-fuel prices and technology investment costs
are assumed to be the same for all regions because most of the
technologies are imported.
The model assumes that all existing power plants will continue
production at current levels, which further assumes that operation
and maintenance continue into the future. This analysis assumes
that sufficient infrastructural support will be available for trans-
portation and installation of new power plants. No constraint is
imposed on the availability of financial resources as the private
sector is expected to be involved in future power sector
development.
4. Scenario development
Drawing on the Philippines energy and environmental policy

Table 5
Existing and planned conversion technologies and their capacity (MW).

Luzon Mindanao Visayas Total capacity Planed (2015e2020)

Coal pulverized sub-critical (PSC) 4.406 0.196 0.232 4.834 3827

Gas combined cycle 2.661 0 0 2.661 50
Gas steam turbine 0.2 0.001 0 0.201
Diesel simple cycle 1.419 0.615 0.799 2.833 18.9
Oil based steam turbine 0.72 0.055 0 0.775 0
Biomass based plant 0.05 0.096 0.036 0.182 84.9
Hydro dam 1.265 0 0.806 2.071 222
Hydro run of river 1.2 0.011 0.255 1.466 0
Wind 0.283 0.09 0 0.373 14
Solar 0.057 0.052 0.001 0.11 200.5
Geothermal 0.844 0.965 0.108 1.917 0

Table 6
Overview of key conversion technologiesa.

Technology Year of introduction Investment cost (US$/kW) Fixed O&M cost (US$/kW/yr) References

Pulverized coal subcritical 2020 2012 40.24 [34e36]

Integrated gasification combined cycle 2025 2770 69.25 [34]
Fuel-oil steam turbine 2020 825 9 [24,35,36,45]
Diesel-based simple cycle 2016 461 70 [37]
Natural gas steam turbine 2020 800 35 [38]
Natural gas combined cycle 2020 917 13.17 [35,36,38]
Hydro 2020 3210 96.30 [35,38,39]
Biomass 2020 3323 73.12 [40]
Solar PV 2020 3959-3150b 60 [41,42]
Concentrated solar power 2020 4565-3939b 67.26 [38,41]
Wind 2020 2800-2500b 36 [35,40e42]
Geothermal 2020 4066 101 [35,43]

Notes.
a
Most of the investment costs for new technologies are based on anticipated cost data from the Department of Energy.
b
The later value shows investment cost in 2030 as technology learning cost effects are considered in modeling, i.e. the investment costs for these technologies decrease
during the investment periods.
148 M.A.H. Mondal et al. / Energy 147 (2018) 142e154

goals outlined in (1) the Philippine Energy Plan (2012e2030) [49],
(2) the intended nationally determined contributions of the
Philippines (INDCs) [11], (3) the National Renewable Energy Pro-
gram (NREP) [50], (4) the carbon pricing report [8], (5) the energy
demand projections policy brief [29], and other key documents on
the development of the power sector [29], the following alternative
policy scenarios were developed in the TIMES model (summarized
in Table 7):
1. Reference scenario: This scenario does not impose any policy
interventions and assumes the continuation of existing energy-
economic dynamics. It serves as a reference for comparing
alternative policy options and technology choices, as well as
investments, technology capacity, energy requirements, cost,
and GHG emissions.
2. Renewable portfolio standard (renewable-target) scenario: This
is the “what if” scenario, in which a certain share of renewable-
based power generation is targeted to meet electricity demand.
This scenario assumes an accelerated development of
renewable-based power generation from 30% of the country's
total electricity demand by 2025 to 50% by 2040. This alternative
policy option is based on the NREP, which outlines the govern-
ment's renewed commitment to promoting renewable energy
use to contribute to power generation.
3. Carbon-tax scenario: This scenario is based on a recent proposal
on carbon pricing. A carbon tax of US$10/ton, US$20/ton, and
US$30/ton is imposed in 2020, 2030 and 2040, respectively
4. Subsidized renewable-based power generation (renewable-
subsidy) scenario: To promote renewable-based power gener-
ation, the Philippines currently imposes a feed-in tariff (FiT).
This scenario is the “what if” in which a subsidy is applied
instead of the FiT for wind, solar, biomass, and hydropower
generation. A subsidy of US$0.04/kWh for hydro and biomass,
US$0.05/kWh for wind, and US$0.06/kWh for solar (30% of
existing FiT) in 2020; and in 2030, US$0.03/kWh for hydro and
biomass, US$0.04/kWh for wind and solar (20% of existing FiT).
5. Limited coal-based power generation (coal-share) scenario: This
scenario assumes the government's current policy of main-
taining future coal-based power generation at about a 30-
percent-share of total power generation. It assumes a 40-
percent coal-based generation share in 2016, which is ex-
pected to decrease to 30% by 2030 to minimize imported coal
use for power generation.
5. TIMES optimization results
The TIMES model results for the reference scenario show that
the Philippines power generation capacity is expected to increase
from 18.4 GW in 2014 to 37.3 GW in 2040 in order to meet the
forecast electricity demand during the modeling period (Table 8).
The growth rate of the power generation capacity is 2.75% per year.
Projected year-wise installation capacity is relatively lower than the
projected electricity demand growth due to selection of more
efficient power plants. The structure of generation capacity changes
significantly with heavy dependence on coal-based technologies.
Coal-based generation capacity increases from 5.8 GW in 2014 to
17.9 GW in 2040, an average growth of 4.4% per year. In the refer-
ence scenario, new pulverized coal subcritical (including planned)
power plant capacity selection increases from 1.4 GW in 2016 to 4.8
GW in 2040.
Gas combined cycle, hydro, and geothermal plants were also
chosen by the model in the later period of this analysis. The model
finds some potential for geothermal and hydropower to contribute
to electricity production in the reference scenario. Integrated
gasification combined cycle, solar PV, CSP, and wind-, oil-, and
biomass-based generation capacity are not selected for new in-
vestment in the reference scenario. The model outcomes show that
there is an opportunity to develop hydro and geothermal power
plants in the future given the expected increase in imported coal
prices. Technology learning cost effects of solar PV, CSP, and wind-
power generation did not work in the reference case and could not
compete with coal and available other sources of energy.
Electricity generation by plants increases from 76.6 TWh in 2014
to 234.9 TWh in 2040 under the reference scenario (Table 8).
Similar to the installation capacity, electricity generation from coal-
based power plants increases from 36.2 TWh in 2016 to 135 TWh in
2040. This represents a growth in coal generation share from about
43.0% in 2016 to 57.5% in 2040. Conventional renewable energy
technologies (hydro and geothermal) generation shares decrease
from 31% in 2016 to 24% in 2040. The TIMES modeling fuel-share-
mix for power generation under the reference scenario closely
follows the policy scenario of temporary utilization of the lesser-
cost (policy 2) scenario under the FILIPINO 2040 strategy report
titled Energy: Power Security and Competitiveness [28]. A compari-
son of power generation shares by fuel type from TIMES and FILI-
PINO 2040 is presented in Table 9.
The TIMES results under the reference scenario show that fossil-
fuel consumption significantly increases from 535 PJ in 2014 to
1646 PJ while import dependency sharply grows from 257 PJ in
2014 to 1073 PJ in 2040dan average growth of fuel dependency of
about 7% per year. The model suggests that the Philippines need to
import energy for power generation to meet the future electricity
demand. The CO2 emissions are also expected to increase by 3.3
times in 2040 compared to the base year of 2014. In the reference
scenario, the model did not find feasibility of electricity trading
across the studied regions of Luzon, Mindanao, and Visayas.
Fig. 3 shows the least-cost technology capacity choices by fuel
type for all alternative policy scenarios. The total capacity is slightly
higher than under the reference scenario, due to the increased
contribution from renewable energy technologies, such as solar PV,
concentrated solar power, and wind, which have more limitations
due to daylight hours and wind speed, respectively. Capacity in-
creases from 18.4 GW in 2014 to 41.5 GW, 42 GW and 48 GW in 2040
under the renewables-target, carbon-tax, and renewables-subsidy
scenarios, respectively.
The capacity share of coal-based power plants decreases from
about 32% in 2014 to 25%, 20%, 28%, and 17% in 2040 in the
renewables-target, carbon-tax, coal-share, and renewables-subsidy
scenarios, respectively. The renewable energy technology capacity

Table 7
Summary of scenarios analyzed in the Philippines TIMES model.

Scenarios Constraints/policy implications

Reference No policy implications. Considers only current energy-economic dynamics

Renewables-Target 30% by 2025 and 50% by 2040 renewable based power generation
Carbon-Tax 10, 20 and 30 USD/ton by 2020, 2030 and 2040, respectively
Renewables-Subsidy As discussed (US$ 0.03/kWh to 0.06/kWh)
Coal-Share 30% coal based generation by 2030
 M.A.H. Mondal et al. / Energy 147 (2018) 142e154 149

Table 8
Generation capacity development, electricity generation, energy demand, and GHG emissions in the reference scenario.

Technology capacity (GW) by fuel Reference scenario (without any policy intervention)

2014 2016 2020 2025 2030 2040

Coal 5.84 7.22 8.22 8.22 9.40 17.93

Oil 3.61 3.64 3.64 3.64 3.64 3.63
Gas 2.86 3.33 3.33 3.34 3.84 5.00
Biomass 0.18 0.22 0.23 0.23 0.23 0.21
Geothermal 1.92 1.92 1.92 1.92 1.92 3.82
Hydro 3.54 3.57 3.66 3.96 5.51 6.06
Solar 0.11 0.26 0.26 0.26 0.26 0.26
Wind 0.37 0.39 0.39 0.39 0.39 0.38
Total capacity (GW) 18.43 20.55 21.65 21.96 25.18 37.30
Electricity generation (TWh)
Coal 31.49 36.21 50.95 56.69 67.20 135.07
Oil 7.57 2.58 0.00 10.88 14.40 0.43
Gas 16.31 17.61 21.17 25.50 29.96 39.08
Biomass 0.96 0.19 0.64 1.26 1.26 1.13
Geothermal 10.07 10.07 10.07 10.07 10.07 23.41
Hydro 8.79 16.16 16.59 19.18 30.03 33.90
Solar 0.29 0.72 0.72 0.72 0.72 0.72
Wind 1.14 1.18 1.18 1.18 1.18 1.16
Total production (TWh) 76.62 84.73 101.32 125.50 154.83 234.90
Fossil fuel consumption (PJ)
Coal 307.7 354.4 504.3 563.9 672.0 1340.6
Oil 102.36 37.2 0.00 139.71 190.41 5.04
Natural gas 124.98 136.0 163.38 197.85 232.07 300.51
Total (PJ) 535.10 528.1 667.66 901.43 1094.50 1646.12
Imported fuel 256.97 227.3 321.44 498.41 634.92 1073.41
Import share (%) 48.02 43.2 48.14 55.29 58.01 65.21
GHG emissions (“000” tons)
Carbon dioxide (CO2) 43749 43922 56870 74894 90801 144057
Nitrogen oxides (NOx) 938 956 1277 1646 1996 3390
Sulfur dioxide (SO2) 86 87 112 148 179 286

Table 9
Comparison of power generation share (%) by fuel type.

Generation by fuel type 2016 2040

Policy Brief: Policy 2 TIMES: Reference Policy Brief: Policy 2 TIMES: Reference

Coal 44 42.7 57 57.5

Natural gas 20 20.8 16 16.6
Conventional (hydro and geothermal) renewable 32 31 24 24.4
Variable renewable (biomass, wind and solar) 1 2.5 1 1.3
Others (diesel and heavy fuel oil) 3 3 2 0.2

share dramatically increases from about 32% in 2014 to 55%, 59%,
and 67% in 2040 in the renewables-target, carbon-tax, and
renewables-subsidy scenarios, respectively. Geothermal contrib-
utes significantly in the carbon-tax, coal-share, and renewable-
target scenarios. Subsidies help to promote the contribution of
hydro, wind, and solar technologies. CSP is chosen at the end of the
analysis period (2040) by the model only in the renewables-target
scenarios. Oil-based power plants were not selected by the model
due to the oil price and lower efficiency of technologies. The
decreasing cost of solar PV and wind power over time increases the
attractiveness of these technologies and leads to a higher diffusion
rate in the Philippines' power sector under the renewables-target,
carbon-tax, and renewables-subsidy scenarios.
Under the renewables-target scenario, the contribution from
renewable-based power increases from 21 TWh in 2014 to 117 TWh
in 2040. Geothermal power generation is the second highest at
44 TWh, and coal remains as the highest, at 77 TWh in 2040 (Fig. 4).
Coal-based generation decreases in the renewable-target scenario
to about 43% (58 TWh) in 2040 compared to the reference scenario.
Renewable energy production shares shift from 29% to 30% to 37%
to 43% to 50% by 2020, 2025, 2030, 2035, and 2040, respectively, in
the renewables-target scenario. The model completely follows the
constraints applied to produce 30% and 50% of renewables-based
power generation by 2025 and 2040 (Fig. 4). Electricity genera-
tion from solar PV, CSP, and wind is anticipated to grow from
1.4 TWh in 2014 to about 39 TWh in 2040. The model also selects
CSP to produce about 4.4 TWh in 2040 to meet the goal of 50%
renewable share by 2040.
The maximum contribution from renewable energy is expected
in the carbon tax and renewables subsidy scenarios. Due to the
absence of subsidies on geothermal power generation, the model
did not show feasibility to invest in new geothermal plants in the
renewables-subsidy scenario. On the other hand, the carbon-tax
scenario shows a growing contribution of geothermal, with a pro-
jected increase from about 10 TWh in 2014 to 59 TWh in 2040
(Fig. 4). Due to the scenario specifications of a carbon tax and
subsidies for renewables, the model finds alternatives to fossil fuels,
specifically coal. Renewable energy dominates generation with 57%
and 60% in 2040 in the carbon-tax and renewables-subsidy sce-
narios, respectively. This shrinks cumulative coal-based power
generation during the analysis period from 2243 TWh in the
reference scenario to 1553 TWh in the carbon-tax and 1444 TWh in
the renewables-subsidy scenario. Gas-based generation maintains
almost similar shares in all scenarios, likely due to reaching
150 M.A.H. Mondal et al. / Energy 147 (2018) 142e154

Biomass Coal Diesel Gas Geothermal HFO Hydro Solar Wind

50

40
Capacity level (GW)

30

20

10

0
2014
2016
2020
2025
2030
2035
2040
2014
2016
2020
2025
2030
2035
2040
2014
2016
2020
2025
2030
2035
2040
2014
2016
2020
2025
2030
2035
2040
Renewable-Target Carbon-Tax Coal-Share Renewable-Subsidy
Year
Fig. 3. Power generation capacity selection.

Biomass Coal Diesel Gas Geothermal HFO Hydro Solar Wind

250

200
Electricity generation (TWh)

150

100

50

0
2014
2016
2020
2025
2030
2035
2040
2014
2016
2020
2025
2030
2035
2040
2014
2016
2020
2025
2030
2035
2040
2014
2016
2020
2025
2030
2035
2040

Renewable-Target Carbon-Tax Coal-Share Renewable-Subsidy

Year
Fig. 4. Electricity generation by fuel type.

maximum availability for power generation in the Philippines. primary energy supply-mix for 2040 is considered as a principal
Fig. 5 recapitulates the wide-ranging results that are generated metric to compare the relative role of various energy sources under
by the TIMES model for each of the alternative sustainable power all developed scenarios (Fig. 5). This metric presents a clear indi-
sector development strategies for the Philippines. The optimal cation of the amount and types of primary energy choices by the
 M.A.H. Mondal et al. / Energy 147 (2018) 142e154
Imp. dep: 2014-
Ren. gen: 2014-
2500
2000
Resource level (PJ)
1500
1000
500
0 -25
Reference Renewable-Target
Biomass Mined coal Imported coal
Fig. 5. Primary energy supply-mix in 2040 and percentage change of total system cost (2014e2040). Notes: Fig. 5 also demonstrates the amount of cumulative imported energy and
renewable-based generation, including the percentage change compared to the reference scenario.
model under the specified policy constraints on power-sector
development using least-cost solutions to meet projected elec-
tricity demand. The colored bars (except the inside yellow thin bar)
show the breakdown of primary sources of energy in PJ that are
expected for use to produce electricity in 2040, under the reference
and alternative policy scenarios. Total fossil-fuel use in 2040 re-
duces from 1646 PJ in the reference scenario to 1076 PJ in the
renewables-target, 910 PJ in the carbon-tax, 1244 PJ in the coal-
share, and 864 PJ in the renewables-subsidy scenario. Alterna-
tively, implications of renewable energy in the year 2040 increase
from 757 PJ in the reference scenario to 1594 PJ in the renewables-
target, 1863 PJ in the carbon-tax, 1450 PJ in the coal-share, and
1897 PJ in the renewables-subsidy scenario. Coal dominates the
energy supply-mix in the later period of this study, which shifted
into a more diverse use of renewables in all the alternative policy
options. Diversification of the supply mix is one of the co-benefits
of the alternative energy development options.
The numbers above each scenario in the first row of Fig. 5 show
the amount of import dependency in PJ (cumulative from 2014 to
2040) and the percentage change of dependency of the alternative
policy options compared to the reference scenario. The numbers in
the second row present cumulative renewable-based power gen-
eration in TWh for each scenario and the percentage increase of
generation from renewables in the alternative scenarios compared
1
The “system cost” represents all costs during the study period (2014e2040)
related to energy technologies investment, fuel, operation and maintenance,
import, transmission, distribution, and other costs.
151
25
20
System cost increased (%)
15
10
5
-5
-10
-15
-20
Carbon-Tax Coal-Share Renewable-Subsidy
Oil Gas Geothermal Hydro Solar Wind System cost
to the reference scenario.
The thin yellow internal bar in the alternative policy scenarios in
Fig. 5 represents the percentage change of total “system cost” when
compared to the reference scenario.1 The model estimates that a
total of US$69.7 billion of investment is required in the reference
scenario from 2014 to 2040. In order to compare the costs of the
alternative policy options, the total system cost for the reference
scenario is used as a reference point from which percent changes in
total cost are measured for the alternative policy scenarios. The
total system cost increases by 2.6% in the renewables-target, 19.9%
in the carbon-tax, and 2.8% in the coal-share scenario when
compared with the reference scenario. In the renewables-subsidy
scenario, the total system cost decreases by 22% relative to the
reference scenario due to the incentive for power generation from
biomass, hydro, wind, and solar energy resources. This incentive
contributes to substantial additional investment in these technol-
ogies. Electricity generation increases from 11 TWh in 2014 to
131 TWh in 2040 from the technologies in the renewables-subsidy
scenario. Compared to the reference scenario, cumulatively
1099 TWh are added from renewable energy in the renewable-
subsidy scenario. Said different, a US$15.6 billion subsidy sup-
ports the addition of 1099 TWh from renewable energy to power
sector development during 2014e2040.
The alternative energy development options can make impor-
tant contributions to improve energy security for the Philippines.
The energy security issue is evaluated through an assessment of the
diversification of the primary energy supply-mix and self-
sufficiency of resource use for future power generation. A key in-
dicator of this is reduced dependency on imported fuels and
152
integration of available renewable resources, which helps to
improve overall energy security.
The TIMES model finds internal, regional trading of electricity in
the carbon-tax, coal-share, and renewables-subsidy scenarios. In
the carbon-tax scenario, there is a potential for trade of electricity
from Luzon to Visayas in the later periods of this studyd7 TWh in
2035 and 22 TWh in 2040. From Visayas to Mindanao, it is only
feasible to trade 7 TWh in 2040 under the carbon-tax scenario.
Cumulatively, 94 TWh in electricity trading (from Luzon to Visayas
and Visayas to Mindanao) are expected between 2030 and 2040 in
the coal share scenario. In the renewable-subsidy scenario, the data
suggest a cumulative 73 TWh of trading electricity among the re-
gions between 2014 and 2040.
An additional co-benefit of these policy scenarios is helping to
reduce GHG emissions (CO2, NOx, and SO2) through the selection of
efficient and clean technologies and optimal use of primary energy
resources. In the reference scenario, GHG emissions are about
2752 mt between 2014 and 2040. The level of CO2 emissions in-
creases from about 44 mt in 2014 to 144 mt in 2040 under the
reference scenarioda more than three-fold increase in emissions in
2040 compared to the base year of 2014. Fig. 6 shows the per-
centage change in CO2 emissions for all alternative policy scenarios
compared to the reference scenario. CO2 emissions go down from
100% (144 mt in 2040) in the reference scenario to 50% (72 mt in
2040) under the renewables subsidy scenario. CO2 emissions drop
by 38%, 50%, and 29% in the renewables-target, carbon-tax, and
coal-share scenarios, respectively (Fig. 6). Total CO2 emissions be-
tween 2014 and 2040 decrease by 20%, 30%, 13%, and 36% in the
renewables-target, carbon-tax, coal-share, and renewables-subsidy
scenarios, respectively, from the reference scenario emissions
levels.
Due to the increased use of renewable energy technologies in
the energy system for power generation, the marginal electricity
price in the renewable-target and carbon-tax scenarios is relatively
higher than the price in the reference scenario (Fig. 7). In the
reference scenario, the marginal distributed electricity price in-
creases from US$0.09/kWh in 2016 to US$0.2/kWh in 2040 due to
heavy reliance on imported fuels in the later period of the analysis.
The marginal electricity price in the coal-share scenario is almost
identical to the reference scenario price. The carbon tax signifi-
cantly increases the marginal electricity price in the carbon-tax
scenariodby US$0.27/kWh by 2040.
6. Sensitivity analysis
The sensitivity of these results to changes in the assumptions is
presented in this section. The analysis considers the implications
for power generation of alternative discount rates and alternative
investment costs of new renewable energy technologies (solar PV,
wind, and CSP), coal prices, and gas supply. Because the model's
Reference Renewable-Target Carbon-Tax Coal-Share
110%
CO2 mitigation (% changed)
100%
90%
80%
70%
60%
50%
40%
2016 2020 2024 2028 2032
Year
Fig. 6. Percentage change in CO2 emissions.
M.A.H. Mondal et al. / Energy 147 (2018) 142e154
objective function is to minimize total system costs, the discount
rate becomes more significant over the length of the study period.
Two alternative discount ratesdof 4% and 8 percentdare applied,
with a 6-percent rate applied in the reference scenario. A 20-
percent increase in the coal price is assessed, as well as a 20-
percent increase and decrease in growth of gas production, to see
the impact on the selection of technologies. The impact of a
decrease of 10% in investment costs for renewable energy tech-
nologies is also analyzed, given that the cost of these technologies
has been falling is known to fall as experience with them increases.
With a discount rate of 4%, the model finds more investment in
geothermal and wind power and less investment in coal-based
power plants from 2030 to 2040. Geothermal capacity increases
significantly, from 3.82 GW in the reference scenario to 7.95 GW in
2040 with a 4-percent rate. The lower discount rate allows for in-
vestment in wind-power plants late in the analysis period
(2035e2040). There are no changes on hydro capacity allocation.
A higher discount rate (8%) suggests more investment in fossil-
fuel-based plants. Solar and wind technologies are not selected and
geothermal capacity decreases from 3.82 GW in the reference
scenario to 2.30 GW in 2040. Investment in hydro power decreases
slightly in 2030, from 5.5 GW to 4.3 GW. A 10-percent decrease in
the investment cost of new renewable technologiesdsolar PV, CSP,
and wind powerdcontributes to an increase in new wind capacity
of 3 GW in 2040. Investment in wind power replaces geothermal
capacity and, to a lesser extent, coal-based power plants between
2035 and 2040. However, solar PV and CSP are still not selected.
Total generation capacity in 2040 reaches 38.5 GW with the 8%
discount rate instead of 37.3 GW, as in the reference scenario.
Production of natural gas for power generation has limited
impacts on selection of renewable energy technologies. It only al-
lows substitution of fossil-fuel-based technologies for future tech-
nology investment. A 20-percent reduction in the annual growth of
the natural gas supply promotes coal-based power generation. The
model suggests a reduction in investment in gas-based power plant
capacity of about 1 GW in 2040, mainly replaced by coal plants.
Opposite outcomes are found when annual growth of the natural
gas supply is increased by 20% compared to the reference scenario.
The coal price has a significant impact on technology selection. A
20-percent increase in the coal price decreases installed coal-based
power plant capacity by a total of 5.6 GW in 2040. Natural-gas plant
capacity reaches 5 GW by 2040 and uses the upper limit of gas
supply. Geothermal and hydro power are chosen as least-cost and
optimal solutions to replace coal plants. Even in this case, the model
did not find investment in solar technologies feasible.
7. Conclusions
The TIMES model findings demonstrate how different technol-
ogies and energy resources can be identified to meet projected
electricity demand and national policy priorities, namely achieving
energy security, diversifying the energy supply-mix, promoting
renewable energy technologies, and improving energy self-
Renewable-Subsidy
sufficiency. Each of the alternative policy options also has impli-
cations for energy system cost, energy requirements, and envi-
ronmental impacts. All of these considerations must be weighed
carefully to invest in the Philippine power sector for long-term
sustainability.
The model suggests that the current energy supply-mix must be
diversified to minimize import dependency on fossil fuels. Solar PV,
wind, and conventional renewable technologies play an important
2036 2040
role in contributing to power generation. The cost of promoting
renewable energy technologies to reach the renewable targets and
coal shares set forth in the policy goals is reasonable. The total
system cost during the modeling period (2014e2040) increases by
 M.A.H. Mondal et al. / Energy 147 (2018) 142e154
30.0
25.0
US Cent/kWh
20.0
15.0
10.0
5.0
2016 2020 2024
Reference Renewable-Target
Fig. 7. Marginal distributed electricity price.
2.6% in the renewable-target scenario and 2.9% in the coal-share
scenario compared to the reference scenario cost of US$69.7
billion. The additional goals of energy security and GHG mitigation
would also be achieved. The total system cost increases by about
19.9% in the carbon-tax scenario and decreases by 22.5% in the
renewable-subsidy scenario. The government of the Philippines
could impose a carbon tax on fossil-fuel use to encourage clean
energy use and raise funds for the promotion of renewable energy
technologies. Optimization results show that 20e30% of the exist-
ing FiT or subsidies on renewable energy would help to promote
renewable technologies and reduce 22.5% of total system cost.
The optimal energy supply-mix and technologies selected by
the model in all alternative policy scenarios would allow the
Philippines to meet their own sustainable energy development
goals as well as the INDC mitigation target. Accelerated develop-
ment of the renewable energy scenario does not have huge addi-
tional cost implications, considering that the long-run investment
cost of these technologies is expected to decrease rapidly. In this
renewables target scenario, import dependency and GHG emis-
sions drop significantly when compared to the reference scenario.
The mitigation cost of CO2 emissions is about US$3.5/ton in the
renewables-target scenario, which below typical costs in developed
countries. Therefore, it is attractive to the private sector for clean
development mechanism (CDM) projects and also for developed
countries to invest in renewable energy technologies in the Phil-
ippinesdto reduce their own committed CO2 emissions. All alter-
native policy scenarios show that the Philippines could promote
renewable energy technologies for power generation to diversify
the energy supply-mix, improve its energy security, and develop a
low-carbon society.
To achieve these promising goals, however, the Philippines
needs a vision and strong policy support. In addition to this energy
assessment, it is necessary to assess the trade-offs across other
sectors from investment in sustainable energy. This energy
assessment also requires strong links across other sectors of the
Philippine economy in order to identify and define the impacts of
alternative energy development strategies. Future steps involve
153
2028 2032 2036 2040
Year
Carbon-Tax Coal-Share Renewable-Subsidy
linking this bottom-up energy modeling approach with a top-down
national computable general equilibrium model. Such a study is
already planned.
Acknowledgements/Funding
This research was supported by the CGIAR Research Programs
on Policies, Institutions and Markets, Water, Land and Ecosystems
and Climate Change, Agriculture and Food Security.
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